APOLLO REAL EState Inv. FUND v. GELBER

Decision Date11 February 2010
Docket NumberNo. 1-09-1989.,1-09-1989.
Citation935 N.E.2d 963,343 Ill.Dec. 735,403 Ill.App.3d 179
PartiesAPOLLO REAL ESTATE INVESTMENT FUND, IV, L.P., a Delaware Limited Partnership, Plaintiff-Appellees, v. Brian GELBER, Gelber Securities, LLC, an Illinois Limited Liability Company, Ice, LLC, an Illinois Limited Liability Company, Go, LLC, an Illinois Limited Liability Company, Joseph Niciforo, Anne M. Niciforo, H. Robert Holmes, Laurence Woznicki, and Gary Scheier, Defendants-Appellants.
CourtUnited States Appellate Court of Illinois

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

James E. Dahl, Patrick K. Dahl, Dahl & Bonadies, Chicago, IL, for Defendants-Appellants.

Kevin Keating, Keating & Shure, LTD, Chicago, IL, for Plaintiff-Appellee.

Presiding Justice TOOMIN delivered the opinion of the court:

In this appeal we are asked to determine the sufficiency of allegations in an action by a judgment creditor under the Uniform Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West 2006)). In 2004, plaintiff, Apollo Real Estate Investment Fund IV, L.P. (Apollo), was assigned an Ohio judgment obtained by its assignor against several corporate entities. Thereafter, Apollo commenced this proceeding to collect money it claims was wrongfully transferred to them by one of those debtor corporations in avoidance of payment for work earlier performed by the judgment creditor. Apollo's amended complaint alleged two counts under the Uniform Fraudulent Transfer Act, one count for breach of fiduciary duty, and one count for unjust enrichment. The circuit court's order dismissing the complaint contained a Rule 304(a) finding allowing this appeal to proceed. Apollo appeals only the dismissal of the claims under the Uniform Fraudulent Transfer Act. For the follow reasons, we affirm in part, reverse in part, and remand.

BACKGROUND

The instant proceeding arises from the identical factual background as recited in our earlier opinion answering the certified questions regarding the unjust enrichment claim pursuant to Supreme Court Rule 308 (155 Ill.2d R. 308). See Apollo Real Estate Investment Fund, IV, L.P. v. Gelber, 398 Ill.App.3d 773, 343 Ill.Dec. 721, 935 N.E.2d 949, 2009 WL 5206175 (2009). Where necessary to resolution of the present appeal, the facts will be repeated, or given in more detail where they were not relevant to the prior appeal but are relevant here.

In 1994, David Lasier founded TWS, Inc., a holding company, and Telecom Wireless Solutions, Inc. (TWS), an Atlanta-based telecommunications company. Under the umbrella of TWS, Lasier also formed other affiliates and subsidiaries to acquire, develop, and operate wireless networks, which included: TWS International, Inc. (TWS International); OPM Auction Company (OPM); Blue Sky Communications, Inc.; Blue Sky Communications, L.L.C.; and Blue Sky International, Ltd. (BSCI). We refer to the corporate entities under the umbrella of TWS collectively as the “TWS companies.”

On December 1, 1997, Gelber Securities, Inc. (Gelber Securities), extended a $2.4 million line of credit to TWS under a line of credit agreement, secured by assets of TWS. Gelber Securities was a shareholder of TWS. One of Gelber Securities' principals was defendant Brian Gelber, who was also a member of the board of directors of TWS. Gary Scheier was also on the board of directors of TWS.

On December 31, 1997, Gelber Securities assigned all of its rights and obligations under the line of credit, including its right to repayment, to Ice, LLC, which was formed by Gelber. The members of Ice, LLC, included the managing member Go, LLC, whose members included Gelber and his sons. The other members of Ice, LLC, were Joseph Niciforo, Anne M. Niciforo, H. Robert Holmes, and Laurence Woznicki. TWS subsequently drew almost the entire balance of the $2.4 million credit line.

In 1999, the TWS companies, through OPM, purchased licenses at an FCC auction at a cost of less than $4 million to operate wireless networks in West Virginia. OPM's sole function was to hold the licenses; it did not conduct any business operations. The TWS companies hired an outside company, Divine Tower International Corporation (Divine), to design, develop, and construct the network. Accordingly, in May 1999, Divine and TWS executed a letter of intent providing that Divine would prepare proposals and quotations on the network infrastructure, and that Divine would be utilized to develop and construct the network “for Blue Sky Communications (BSC), through appropriate domestic and international affiliates.” On May 27, 1999, Divine and TWS executed a quick-start agreement providing Divine 30 days to identify and prepare reports for network development areas.

On November 29, 1999, Divine and BSCI executed a memorandum of understanding providing that Divine was to fund, develop, construct, and lease operating assets to BSCI in specific geographic regions in West Virginia. The memorandum of understanding stated that BSCI, “through its affiliated company OPM Auction Company,” was the owner of the West Virginia licenses, and that BSCI, through its wholly owned subsidiary, Blue Sky Communications, L.L.C., would manage and operate the mobile telephone services in the designated areas. The memorandum of understanding further provided that Divine agreed “to contract various network design and engineering services, as mutually agreed to, to TWS, Inc., the parent company of BSCI, or its affiliates and sometimes to a team comprised of TWS (or its affiliates), BSCI, and [Divine] engineering staff.”

According to Apollo, subsequent to these agreements the TWS companies, including OPM, orally agreed with Divine that the TWS companies would pay Divine $9,750 for Divine's work on each geographical radius for the wireless towers in West Virginia, referred to as a search area ring (SAR). The TWS companies issued Divine 239 SARs, which Divine worked on developing, and as a result the TWS companies owed Divine $2,330,250. Divine could not have worked on these SARs without the agreement of OPM, which held the licenses. The TWS companies, including OPM, orally agreed to compensate Divine for its work on obtaining leased sites at $24,375 per leased site, which amounted to a total of $1,974,375. Further, the TWS companies, including OPM, orally agreed with Divine to pay $29,250 per site for construction, and owed Divine $146,250 for its pre-construction work on five sites.

Nonetheless, on July 21, 2000, the TWS companies informed Divine that they were ceasing all operations relating to the West Virginia network and instructed Divine to stop all work. On September 13, 2000, Divine submitted an invoice to Blue Sky Communications, Inc., for $2,978,500 for the work it performed, with 1.5% monthly interest after 30 days. On November 20, 2000, the maturity date of the working capital line of credit agreement, TWS owed Ice, LLC, as Gelber Securities' assignee, $2.378 million in principal and accrued interest. TWS and Ice, LLC, subsequently agreed to extend the maturity date to July 31, 2001.

On June 29, 2001, OPM as seller, together with TWS as the sole shareholder, sold the West Virginia licenses to Key Communications, Inc., for approximately $14 million. OPM sent the majority of the sale proceeds to TWS and paid Gelber Securities $2,385,240. Gelber Securities then caused some or all of those funds to be transferred to Ice, LLC, for distribution to its members. OPM received no consideration for this transfer, nor did it retain any proceeds of the sale. Shortly thereafter, OPM dissolved because it had no assets. Neither OPM nor any of the other TWS companies paid Divine.

In 2002, Divine filed suit against the TWS companies in the United States District Court for the Southern District of Ohio, Eastern Division, captioned DTIC International Corp. v. Blue Sky Communications, Inc., No. 2:02-CV-00905. On April 13, 2004, the district court granted Divine's uncontested summary judgment motion and entered judgment in favor of Divine and against all the TWS Companies in the amount of $4,968,351, plus prejudgment interest in the amount of $1,763,019, for a total judgment of $6,641,376. OPM had appeared in that case and vigorously litigated, engaging in extensive discovery, yet failed to defend against Divine's summary judgment motion.

The TWS companies did not pay Divine on the judgment, and Divine subsequently filed a chapter 11 bankruptcy petition. 11 U.S.C. § 1101 et seq. (2006). Apollo was one of Divine's secured creditors and had a deficiency claim for its prepetition secured claim against Divine for loans in the amount of $20,646,438.60. On December 12, 2004, the bankruptcy court approved Divine's plan of liquidation, under which Apollo was assigned Divine's judgment against the TWS companies.

On June 23, 2005, Apollo filed an action in the circuit court of Cook County against defendants and others, captioned Apollo Real Estate Investment Fund IV, L.P. v. Brian Gelber, No. 05 L 6954. The case was dismissed for failure to state a claim pursuant to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 2004)), with leave to amend. Apollo voluntarily dismissed that action and refiled it in this proceeding on May 17, 2007. Apollo asserted two counts for claims for violations of the Illinois Uniform Fraudulent Transfer Act, one count for breach of fiduciary duty, and one count for unjust enrichment, against Brian Gelber, Gelber Securities, LLC, Ice, LLC, and Go, LLC, whom we will refer to collectively as the “Gelber defendants.” 1 Pursuant to the Gelber defendants' motion, the circuit court dismissed the complaint on October 24, 2007, and Apollo filed a first amended complaint alleging the same four counts. On February 7, 2008, the court dismissed the first three counts for failure to state a cause of action, but allowed the unjust enrichment claim to stand. 2 The order dismissing the remaining claims contained language that it was...

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